More institutions are directly connecting to the Target2-Securities (T2S) settlement platform in order to gain better access to the markets therefore allowing institutions to offer the best deadlines; quick reaction to settlement issues and also liquidity benefits, according to Swift.

As the 22 June 2015 deadline looms for the first of four waves of migration to the European Central Bank’s T2S platform, Swifts research shows that many firms believe the benefits of being a directly connected partner (DCP) will outweigh the challenges.

“Many will have to prepare clients and be ready for each wave of migration and the testing procedures, but in the long term T2S is a catalyst for innovation and change, to help clients overcome key regulatory challenges in areas such as asset protection, collateral and liquidity management,” the report said.

The paper explains that DCPs not only have to ensure their internal processes are adapted for T2S, but they also must ensure that their clients are prepared. Many DCPs have chosen to shield their clients as much as possible from the impact of T2S, but there are still changes and adaptations that indirectly connected partners must make in order to operate in the T2S landscape.

“As a large harmonisation project, T2S does not come without challenges for market participants. Many of the organisations that have chosen to become DCPs have done so in an environment of competing industry and regulatory initiatives,” said Isabelle Olivier, head of clearing and settlement Emea at Swift.

The research concludes that the main players in the custody business already have defined strategies and know where they are going in the post-T2S world. 

When T2S was first mooted in 2006, the main focus was on savings and cost benefits. Now with the platform about to be launched, the report says that there is a realisation among market participants that T2S will deliver many benefits to users beyond cost savings.